Issue link: http://www.insightdigital.biz/i/145038
INSIGHT FROM ... Jeff French, Grant Thornton audit practice leader Responsible monitoring Manufacturers can turn conflict minerals reporting into an opportunity The August 2012 Securities and Exchange Commission (SEC) regulation mandating conflict minerals reporting (CMR) is a cost to public companies and their supply chain partners. It's also an opportunity to market your commitment to sustainable business. Large public companies that score suppliers on various metrics, including sustainability, are already adding CMR into the mix. And suppliers that can show customers they can minimize CMR risk — for example, sourcing material from conflict-free locations will gain a competitive advantage and keep their relationships on firm ground. What's included in CMR A portion of the world's supply of minerals is mined in the Democratic Republic of the Congo (DRC) and neighboring countries by armed groups that have committed serious human rights abuses. These conflict minerals are refined to produce four metals commonly used in manufacturing – gold, tin, tantalum and tungsten. Public companies registered in the United States will be required to publicly report: » Their use of the four metals » Efforts through reasonable country of origin inquiries to determine if the metals originated in the listed countries If metals do originate in those countries, companies must exercise due diligence to determine whether they benefited the armed groups. The regulations require only disclosure and don't prohibit use. But the stigma from such public admissions is intended to – and likely will – drive manufacturers to "DRC conflictfree" sources. The first reports are due May 31, 2014, for the 2013 calendar year. Corporate responsibility CMR is likely just the beginning of a long list of corporate and social responsibility (CSR) initiatives. Legislation such as the California Transparency in Supply Chains Act, which requires companies that sell products in California to disclose their efforts to identify suppliers using forced or child labor, is set to proliferate. Also, publicized events 22 | / insight on manufacturing • July 2013 such as the recent garment factory collapse in Bangladesh will cause retailers to further manage supply chain risks. Successful suppliers will be those that demonstrate they truly understand the corporate responsibility expectations of their customers, and do what it takes to meet them. Managing CSR expectations can be costly and timeconsuming. Building effective systems to monitor CSR activities throughout the supply chain and minimize risk is a significant challenge. At the same time, companies can strengthen relationships with existing customers by efficiently meeting their CSR needs – and acquire new customers by building a reputation as an ethical and responsible supplier with high CSR standards. Also, deepening relationships with key vendors in order to meet CSR needs can have other benefits. CMR is likely just the beginning of a long list of corporate and social responsibility (CSR) initiatives. Legislation such as the California Transparency in Supply Chains Act, which requires companies that sell products in California to disclose their efforts to identify suppliers using forced or child labor, is set to proliferate. Private companies not immune The requirements of the SEC's final rule are complex, and issuers will need to learn how it applies to them. But the key impact is that public companies will be looking across their supply chains for any trace of these metals. continued > w w w.in s i g h t o n m f g .c o m